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The U.S. is emerging as a “leading tax and secrecy haven for rich foreigners”
because of its resistance to global tax disclosure standards and the array of tax-free
facilities available for non-residents, according to a European Parliament report.

Released March 7—two weeks before European Union lawmakers visit Washington D.C. and
Delaware to probe money laundering and tax evasion issues—
the report says U.S. states such as Nevada, Wyoming, South Dakota and Delaware are attracting
money flows from around the world because of laws that permit beneficial owners of
companies to remain anonymous.

“The United States provides a wide array of secrecy and tax-free facilities for non-residents
both at the federal level and at the level of individual states,”
the report said.

The report underlines that the U.S., unlike “virtually all of the other developed
counties in the world,” hasn’t agreed to implement the OECD’s common reporting standard
for the automatic exchange of bank and tax data between tax authorities.

‘Fact Finding’
U.S. Visit

The European Parliament’s Panama Papers investigative committee will visit the U.S.
March 21-24 for what has been described as a fact-finding mission.

The delegation will meet with counterparts in the U.S. Congress as well as with representatives
of the U.S. Department of Treasury, the Internal Revenue Service and various think
tanks and organizations.

According to a committee document seen by Bloomberg BNA, the purpose of the visit
is “to discuss with interlocutors the state of play and future perspectives for transatlantic
cooperation in the fight against money laundering, tax evasion and tax avoidance at
international, OECD and G-7/G-20 level, and both tax and beneficial ownership transparency
at U.S. State level.”

OECD BEPS Reforms

The report was published amid mounting concerns among EU member countries and the
European Commission that the Trump administration and the Republican-controlled Congress
won’t implement the Organization for Economic Cooperation and Development’s recommendations
under its Action Plan on Base Erosion and Profit Shifting (BEPS), a massive, two-year
project to rewrite the global tax rules, and thereby will put European companies at
a competitive disadvantage to U.S. companies.

The hard-hitting report comes as the EU begins screening 92 countries, including the
U.S., for possible inclusion on an EU tax haven blacklist, due to be finalized at
the end of 2017.

Delaware

A key concern for the European Parliament Panama Papers committee are existing U.S.
laws that continue to permit beneficial owners of companies to remain anonymous.

Some rules—such as tolerance by states like Delaware or Nevada of highly secretive
anonymous shell companies—"are rather the result of a race to the bottom between individual
states or standards of disclosure and transparency,” the report said.

Referring to Delaware in particular, the report said that the “small East Coast state
ranks first in importance” in the U.S., by a wide margin, and “also serves as one
of the favored places” for real estate funds.

“Delaware’s advanced business statutes make it an attractive place for global investors,”
the report added.

EU Divide

The beneficial owners transparency issue is currently the subject of a pending revision
to the EU Anti-Money Laundering Directive. The European Parliament is pushing for
standards that would require identification of anyone with 10 percent or more of a
company or trust to be posted on a public registry.

However, EU countries oppose the stricter rules based on, among other things, data
privacy standards.

The European Parliament report also noted that because U.S. banking regulation is
split between the federal and state governments, “Delaware, Nevada, Florida and Wyoming—all
with very strict banking confidentiality regulations—would oppose the passing of a
federal law on CRS in Congress.”

FATCA Complaints

Another issue highlighted in the report is the one-sided nature of the U.S. Foreign
Account Tax Compliance Act, as EU governments must provide the U.S. with tax and income
data about U.S. citizens living within their territory, but that reporting isn’t reciprocated
with information about EU citizens living in the U.S.

Since the European Parliament panel began investigating the Panama Papers nearly a
year ago, the FATCA issue has consistently been raised in hearings, the most recent
of which took place March 6.

“The fact is that money laundering takes place when money is transferred from shell
companies in tax havens via countries such as Switzerland and then onto to the U.S.,”
Giuseppe Marino, a professor at Bocconi University in Milan, said at a March 6 hearing
on the role Swiss lawyers and banks played in setting up and facilitating shell companies
revealed by the Panama Papers. “The one-sided nature of FATCA is clearly a problem.”

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